i don't think i've ever seen a case like this where a owner has offered electively to create two below market rate units without any requirement to do so. and i think it's a good one because, as was pointed out, even though they're rent controlled, presumably the rent in pacific heights is fairly high and, you know, it's not going to go down any. when there's a vacancy, the rent is whatever the new rent is. and, so, -- and they're vacant now. affording to what my understanding is, if they were under inclusionary units, that's the 60th percentile ami, which means if they're rental that's what they would have to be rented for. i don't have the number off the top of my head. it would depend how many people you have. presumably you wouldn't have more than two per studio, although you could.

that would -- i think that's the limit. and that sets what that rate is. if they were sold as condos, then it would be 100 percentile, it does make ami. there isn't anything that exists in pacific heights, a couple small units that could be purchased at a very affordable rate. normally i would be in favor of having more bedrooms, but the other good thing is it recaptures the rear yard which should have never been taken away in the first place because you have a rear yard requirement usually for -- even for single-family homes. this recaptures that space for the use of all three. we'll see what the other commissioners have to say. >> commissioner borden. >> i stand very supportive. i thought it was an interesting concept. we always talk about the issue around preserving rent control housing and the point is true. i looked on craigslist and the

cheapest two bed ram apartment in pacific heights was 3150. most of them are within 5 to $6,000 range. that's not affordable at all. i mean, it's rent controlled, but not affordable. and i think that, you know, the spirit of what we're trying to accomplish, that's typically not the case, but in this neighborhood it definitely is the case. the other issue in talking about socioeconomic diversity in the neighborhood, there aren't lots of studio buildings like that. so, particularly in pacific heights and there is a real need for kind of smaller spaces that are less expensive. so, the fact that it would actually be someone who qualifies in the mayor's office housing for affordable housing would contribute quite a bit to the socioeconomic diversity of the neighborhood. if you look at the census numbers and other data, that does not have a lot of low-income individuals living there. i also did look at the fact it was a substandard lot and it was kind of interesting the way it's carved out. i walked by that property, i

used to live in that neighborhood. intrigued, there is that lot and another lot with something shoved in the back. it seems like a bad decision was made a long time ago in terms of having open space. it seemed to have such a large home and they didn't have any outdoor space. i actually think i wish this would be the kind of innovative idea that other project sponsors who are looking, not in every neighborhood city, but in other neighborhood cities to do projects consider joining the neighborhood bmr program. we need units to enter that program. when the economy is slow and new units aren't being added through the mayor's office of housing something like this is really an interesting approach, particularly in a neighborhood that does not have a lot of -- that has a lack of economic diversity. >> commissioner hillis. >> if i can ask a question of staff. the issue of this -- establishing these units as bmr didn't come up in your report.

is this something that came up after? >> we did discuss the rent control thing and try to keep them affordable. i'm going to defer to the city attorney, though. there has to be some sort of nexus if you make that requirement. and i don't think we could find that at the staff level. >> fine. [speaker not understood]. has anybody talked about it? are they open to it, administering additional bmr units? i would imagine they are. has that been discussed at all? it is highly unusual, this kind of approach. >> we haven't had any conversation, staff hasn't. >> did you want to follow-up? >> commissioners, thank you. first, the question of the nexus, i can't see a better nexus than replacing affordable housing option a with affordable housing option b that makes it more affordable.

i do understand the issue. those kind of cases, we thought about that a lot. we certainly -- you know, the reason why we couldn't come up with a replacement of the rent control units i think has a lot to do with costa hawkins, the local control. i don't see anything that would legally prevent the city from accepting these units. no, we haven't talked to should iverctiontion, but we can't imagine they wouldn't accept thea units. they have a robust system of administering units. somebody comes forward, here's two units, they've been recorded why would they say know? >> do you know if there is a requirement to rent them? >> yes, there is a requirement in the policy to rent them. * no wince they're completed the units are required to be redthctionved and sold. the units are supposed to be occupied. >> and that is the intent? >> that's the intent. * >> so -- i generally would not be supportive of demolishing -- i would agree with staff. this is a somewhat unusual case in that you've brought this

proposal to us to add two bmr units. i do see the nexus in my one semester of law school, but i believe the attorney to opine. >> i have two comments. one is thank you for taking care of this beautiful home. if you look at some of the hi storical photos of the panama pacific expo significance of 1915, i believe that home is in a really prominent spot and many of the photographs are taken top of the hill summer street. so, thank you for that. * exposition this is a unique, creative, generous solution. so, i'm in full support. >> commissioner moore. >> this is an extremely difficult case. staff makes recommendation relative to a freestanding building with a roof deck, which is a large historic home. so, we are approving the roof deck and the by-product, bmr

units, i'm not saying this is respectful, but it is a reality. what is in front of us, mr. star's analysis is correct, we have a substandard law and five variances for those units to even be approvable. for those small units that is a large ask. under normal circumstances when we have substandard or constrained lots, our purpose is to look at the units first and find as much compliance as we can because for two units which are not really in size or anything exceptional, that creates a very difficult situation. i want to make a case just to give myself a moment to appreciate the work done by mr. star who operates completely within what he's supposed to do, telling us they are indeed five variances. i think the idea about the roof

deck, [speaker not understood], i don't have any problems with the architectural solutions. however, the variances and what we're getting is typical from me. and i want to ask the city attorney, what tools do we have to guarantee that we're not just approving something where all of a sudden the ability to sell or to rent bmr units in this particular location, become impossible which would then allow the owner -- and again, this is a conversation between myself and the city attorney, and it doesn't imply anything miss trusting the applicant. what would happen for any reason the bmr doesn't materialize and it stays empty, but we have approved a roof deck? >> president fong, kate stacey in the city attorney's office. there are -- i think what the project sponsor is offering here are two rental units.

if these are proposed as rental units, there is the state law costa hawkins that we discussed with the planning commission in the past. and this costa hawkins law generally prohibits the city from imposing rent control restrictions on newly constructed units. although there is an exception within the statute, and that is where the city and the owner have agreed by contract in consideration for forms of assistance specified in the state density bonus statute. or where the city has provided a form of direct financial contribution. in some cases it may be a grant from the mayor's office or in other cases there are releases from code requirements that may result in a direct financial contribution. i think that's what mr. star was referring to when he talked

about having negotiated sometime earlier in the process with the project sponsor and under the costa hawkins act. so, if these units were not able to be rented and a future owner wanted to be released from those rental restrictions, we'd need to make sure that we fit within one of the exceptions under the costa hawkins statute. there is also some apparently conflicting case law that may give us another basis to require these rental units. if these are not meant to be rental units there is a separate nexus requirement mr. genius and mr. star refer to and that is where the city imposes a condition that basically the city has to demonstrate two things. one is that the project has caused the need for that condition, and secondly that

the condition is reasonably proportional to the need caused by the project. and i think mr. junius talked about demolition of two units being the nexus to the need for two additional units. the question here is what is the affordability level and what is that connection between the two units. * i'm not clear on what the project sponsor is offering or what the commission is interested in, whether it's the rental unit or simply as an affordable unit that could be at the developer's discretion, either rental or ownership. >> i greatly appreciate your laying this out for us because it leaves all questions somewhat to be clarified in negotiations which i don't hear or have -- which have not occurred, but you would be privy to them. what i am concerned about is if i support this, is this completely out of the realm of how we look at bmr units, affordable units which are

requirement for building new housing with a percentile of units being set aside for affordability or bmr? here we have the opposite. here you have somebody who wants a roof deck saying, i'll give you this in return. however, the legality or the practicality of this, which could be challenged in court as anything can, particularly it's possible because they have no precedent to it. i would want much more clarity of what that means relative to us even considering it. for the reasons that mr. star presents, i would not support the demolition and for reasons that mr. star presents, i would not approve this type of an arrangement partially because of the substandard lot and the number of variances which on its own does not create ideal units. but if there is another

consideration, i.e., the reality of possibly accepting something like that for which i personally have never -- i don't have any experience or precedent for that, i would consider taking that into consideration. >> commissioner wu. >> i'd ask project sponsor whether or not the units are intended to be rented or sold and then for each of those cases at what ami? we don't know at this point. let me start by answering the question by saying mr. myat wants to comply with the existing affordability requirements that, again, in replacing it for rent control units. at this point i think it's a very generous offer. he's willing to be restricted completely under the section 416 15under the planning code,

do everything every other builder does to ensure they become market rate units. he is asking to reserve the choice whether to make them rental or for sale. they'll be bmr units. there is a robust program. the mayor's office thinks it's very good. over the last decade and getting thea units into their program making sure they work, and making sure below market [speaker not understood]. the only thing we're really asking for here is the option to decide as we progress toward construction whether they're going to be rental or for sale. now, city attorney raises a very good point. if they're rental it becomes a little bit more complicated. there have been plenty rental bmr units that have been approved post palmer which created the problem for l.a., a straightforward agreement blessed by the planning department. the variances made following this one by the zoning administrator, it all worexctiontion. it's complicated, but i do think it works. we've thought a great deal

about it. * i think it is a very good deal for the city. and when you think about it, we're here because the planning code requires us to be here under planning code section 317, and 317 talked a lot about affordability. we would seem to be inevitable that somebody would ask you to take this kind of, you know, program up and consider this offer. >> so, knowing at least in the ownership category there is often a range from 08 to 120 ami, is that a decision to be made later? >> you know, that is a really good question. i was very much along the lines of commissioner antonini. i thought they were relatively fixed at the 60% or in that range for rentals and about 100%, you know, for the for sale. that's the base. that's what we understand, make that representation right now. >> okay, thank you. >> commissioner antonini. >> yeah, without getting into details on that, i think that is an important point. i'm not quite off the top of my head sure, but i believe that

for sale units, it might be the 100th percentile, might be up to 120. i'm not sure what the latest inclusionary law in san francisco. it always was the 100th percentile. and i'm guessing for a single person because they're studios, it can't be more than around 75,000, income would be about the top that you could have and then -- or 80,000. and for the rental unit, which would be at the 60th percentile, 40 to 45,000. i'm just throwing those numbers out as somewhere in the ballpark. so, obviously a lot less than any would be affordable to anyplace else to pacific heights. i think the flexibility is good because if we did run into a palmer problem or costa hawkins, then the project sponsor would have to agree to a sale, which would allow us to go forward. i mean, there are some concerns about sales, too, i believe,

listening to city attorney kate stacey. but i think the ability to sell inclusionary units is easier than renting inclusionary units. is that correct, ms. stacey? >> president fong, kate stacey, city attorney's office. commissioner antonini, if the planning commission didn't require these units be rental, then the costa hawkins -- and it was entirely up to the developer, then we don't -- costa hawkins only applies to requirements that units are rental. what remains is that the nexus showing would need to be made. this is only a two-unit building. so, our planning code section 415 doesn't comply. we only have the findings and the study for units that are five units or more, i think, are the requirements of section

415. so, i think in order for this -- for the planning commission to be able to impose this condition, we'd want to determine that this nexus existed and that it was roughly proportional. in this situation there may be other ways of defining portionality. one may be, just by way of example, definitely apportion alpha silt. i think that's a situation the staff would need to work with project sponsor on establishing what the comparable level would be. there may be other ways of establishing that nexus. i don't have enough information, and i think we'd have to work with staff to figure out what that was. >> i'd be in favor of that kind of thing. it seems as though, although not speaking necessarily to the for sale, commissioner moore talked about all the variances.

many of these variances deal with the lot as it is now. many of these variances are applicable to the existing situation with these two even larger because some of the variances deal with a deck over the property line between them, a lot line adjustment which is really nothing. but dwelling units exposure and required front setback, again, all these things are already nonconforming as they exist, but they have to be restated when we do this. so, we are sort of giving them something and giving them these variances to be able to build. i don't know if that's enough to support us legally for the rental units. but i'd like to see this work and i don't know whether -- we can't necessarily negotiate a contract. but if it was part of a contract, that they be sold at the 100th percentile ami. that might be condition we can put on it if possible. >> commissioner hillis.

>> i'm unclear how to proceed if there is a majority of the commission that wants to move forward with the requirement that these be bmr units. i'm somewhat indifferent whether retro or ownership how we make that happen. >> president fong, kate stacey from the city attorney's office. commissioner hillis, i think the commission would be adopting a motion of intent today because you don't have findings before you for approval. and depending on what the commission's inclination was, if the commission simply wanted to look at affordable units and not specify they be rental units, then the city is not requiring them to be rental units. so, then, we don't have the costa hawkins statute to address. if the commission approves this

project that that condition, certainly you could direct staff to analyze the data that's available on these units and to come back to you with a recommendation for what that affordability component would be. or whether the commission has a lot of leeway in what it can direct staff to do as part of its motion of intent. >> commissioner moore. >> the first thing i would like to ask is that the department and the applicant engage the mayor's office of housing to talk about whether or not whether that office can take on an in-kind donation of below market rate units because since it doesn't fall under the provision of adding units because of the existing laws, is that department willing to engage in such a negotiation? and what are the possible issues that could arise? i don't feel that i can address

it, but i think if [speaker not understood] or other expert in the room, that would be a much more robust discussion. i think we would be well advised to in-kind support the furthering of conversation until we have such answers. the existing units a they stand are noncomplying because they were built at a time, some of the variances which were required were not in place. that doesn't mean any new building would basically grandfather in noncomplying buildings. the rules have changed and on a substandard lot, [speaker not understood] the requirements are much more clearly defined than they were then. so, the building as such, too, remains a significantly deficient building. but i'm prepared to consider looking at this again if,

indeed, the mayor's office of housing was a clear intent of the party in front of us and the offer for this bmr is put in conversation with each other. i do not want to approve a project or support a project with bmr. it's just basically only held out as something until there is no way out for that to ever happen because it just hasn't happened. nobody offers these things up for free. >> excuse me, president fong. kate stacey from the city attorney's office. certainly i was thinking in terms of the commission's inclination to approve this project today. certainly the commission could also ask for a continuance and a report back from staff on certain kinds of issues. there are lots of ways the commission could tact at this time. >> mr. star? >> i was going to recommend because it is not a conditional use, so, the intent to approve, i don't know if that works in this situation. but if the commission seems to

be interested in this idea of talking with the mayor's office of housing and see if we can get these units as bmr units, then i would recommend continuing it for i would say at least a month just because that's how things work, if that would work. and see if we can work something out. but i do know that we did try prior -- i wasn't privy to those discussions. it took awhile. so, if there is interest, i would recommend you continue it for at least a month. >> commissioner antonini. >> i think i'm going to make a motion to continue with the understanding being that i was going to make a motion with intent to approve, but since it is a dr, i think this might be a better way to do it. and, you know, that we continue for -- give us a date or month off, linda. >> commissioners, a month would put you at october 25th. but that hearing is now closed,

a full hearing. so, you could either go a week before that of october 18th or november 3rd. >> could we do two months? >> two months, okay. [laughter] >> november 29th. >> mr. junius, is that acceptable? >> it's a good idea. >> november 29th. >> andrew junius. we would like 60 days to work this out. we understand there are some issues. >> november 29 is i date i here. that would be approximately two months. >> that would work for us. >> so, it's continued to november 29, with the understanding that the aim is to approve the demolition and the replacement project including two affordable units for sale or rent, a price or rent that is consistent with the city's inclusionary income requirements for information only. neder, we're just saying that's the amount. this is not restricted by the

city's inclusionary housing ordinance, but rather we're just using that as a guideline in which we would approve this project. >> commissioner moore. >> my understanding is that this is a continuance for these two parties to work with each other and the project will come back on its merits, but it comes back as a full fledged application. just the very pivotal questions are resolved. there is no promise of anything. the project has support, has interest, particularly it has interest, i would say, at the moment. and for that reason we are supporting it for you to work out what you can and use all of your skills to make it happen. >> would you state that with the intent to be a motion? >> no, i'm trying to strip away a little bit of what information -- [multiple voices] >> if i could just be real clear. >> please. >> it has been continued for two months, november 29. that is an item with [speaker not understood] on whatever they workout.

>> thank you. >> thank you. on that motion -- i don't have a motion. that was my motion. >> that was my motion. i just added a lot of verbiage after. [multiple voices] >> yes, and the public hearing remains open. is that sta second? >> i second it. >> okay. on the motion for items a, the demolition of the new project only, on the motion to continue to november 29th, commissioner antonini? >> aye. >> commissioner board en? >> aye. >> commissioner hill is? >> aye. >> [speaker not understood]. >> [speaker not understood].

>> i called the variance at the same time i called the 12 a and b. so, the variance has been called. the acting zoning administrator is indicating his desire to continue it to the same date of [speaker not understood] that comes before the commission. is that your intent? >> yes, that is my intent. >> thank you. the variance has been continued also, tuesday, 29th of november. commissioners, we still have that action and that motion passed unanimously, by the way. with that action, you are now at general public comment. >> is there any general public comment? seeing none, the meeting is adjourned. >> thank you. [adjourned]